MSFT Options Signal Bullish Bias: Calls at $500 Dominate as AI Growth Fuels Outlook

• MSFT trading at $487.38, up 0.5% with volume surging past 7.8M shares.
• Options market shows 85% of open interest in OTM calls vs. puts, with $500 strike as top call magnet.
• Wedbush and Evercore analysts project $600+ price targets, citing Azure’s AI-driven growth.

Here’s the takeaway: Microsoft’s options market is leaning hard into a bullish narrative, with call options at the $500 strike dominating open interest and technicals hinting at a potential breakout above key resistance. While the stock remains in a long-term range, short-term catalysts and AI-driven optimism are creating a high-probability setup for upside movement.

Bullish Sentiment Locked in OTM Calls, Block Trades Add Mystery

The options chain tells a clear story: traders are betting on a rally. For Friday’s expiration (Dec 26), the $500 call (MSFT20251226C500) leads with 6,780 open contracts, followed by $490 and $505 strikes. This isn’t just noise—the put/call ratio for open interest sits at 0.7, meaning calls outweigh puts by 43%. That kind of imbalance usually precedes a directional move.

But it gets more interesting. A recent block trade of 200 contracts for the MSFT20251031P510 put (expiring Oct 31) moved $300K in volume, while another 600 contracts for the MSFT20250926P490 put were sold. These trades suggest institutional players are hedging or positioning for volatility, but the mixed signals (unknown direction on one trade) keep the narrative open-ended.

AI News Fuels the Fire, But Can It Sustain Momentum?

Analysts aren’t just speculating—they’re projecting MSFT as a 2026 AI megastar. Evercore and Wedbush highlight Azure’s 30%+ growth trajectory, a $392B backlog, and custom chip partnerships as catalysts. The $19B Nebius deal, in particular, signals Microsoft’s push to reduce NVIDIA reliance—a move that could supercharge margins if successful.

But here’s the catch: the stock’s 200-day moving average ($474.48) is a psychological floor, and the RSI at 46.16 suggests it’s not overbought. That means there’s room to run if the AI narrative holds, but a breakdown below $470 (lower Bollinger Band) could trigger defensive positioning.

Actionable Trades: Calls for Aggressive Bets, Puts for Protection

For options traders, the MSFT20260102C500 call (expiring Jan 2) is a prime candidate. With 3,294 open contracts and the stock trading just $12.62 below the strike, this option gains value if MSFT breaks above its 30-day resistance ($479.14). A tighter play? The MSFT20251226C490 call (this Friday’s $490 strike) for a shorter-term pop.

On the cautious side, the MSFT20260102P480 put (2,158 OI) offers downside protection. If the stock stumbles toward its 200-day MA, this put could act as a hedge while the AI story plays out.

For stock buyers, entry near $484–$485 (current price) makes sense if support at $478.36 holds. Targets? The 30-day resistance at $479.14 first, then the 100-day MA ($506.61) as a long-term goal. A breakdown below $470 would invalidate the bullish case.

Volatility on the Horizon: Bullish Trends With a Caveat

The setup is compelling, but don’t ignore the risks. While the options market and analysts are bullish, the long-term ranging pattern (200D MA at $474.48 vs. 100D at $506.61) means a breakout isn’t guaranteed. If MSFT holds above $478, the AI narrative could push it toward $500+ by Q1. But a pullback to $470 would force a reevaluation of the trade.

Bottom line: This is a high-conviction trade for those comfortable with the AI growth story. The options data, technicals, and analyst consensus align—but always keep a stop-loss in play. After all, even the most bullish narratives can hit speed bumps when the market decides to test support.